“Qualifications for the entry level is a Master’s degree plus 5 years of relevant professional experience. For mid-career professionals, the requirements are a Master’s degree plus 8 years of relevant professional experience. Ideal candidates for these positions must have a demonstrated capacity for strategic thinking, the ability to conduct dialogue on relevant development policies and priorities, and be fluent in English with very good writing and communication skills.

All applications must be received by August 31, 2015. Applications received after the closing date will not be considered.”

It always strikes me how different the view of (say) the World Bank is from that of the local entrepreneur, laborer, or mother who works at home. My immediate thought when I hear that any individually-targeted development intervention has failed is “well, could it have succeeded?” In other words, does the intervention manipulate a binding constraint for an individual or household? ………….. The people who know how to learn about those everyday constraints are trained in ethnography—and I mean serious ethnography, the kind that involves languages and staying outside of a hotel.

A focus on institutions implies a different direction. Everyone agrees that institutions are important, but the cutting edge in development economics and related parts of political science focuses elsewhere. Why? Because institutions aren’t manipulable, their features bundle lots of treatments, core concepts remain tremendously fuzzy (try defining governance, for example), we don’t seem to have learned a lot from decades of studying them, and the potential for disaster from bad institutional design is just enormous.

I agree with Pepinsky. I would also add that on top of taking local contextual variables and institutions seriously, development practice and research should also take local elites (both economic and political) seriously.

The discourse on development oscillates between “institutions” and “the poor.” Governance reforms try to get institutions right. Pro-poor policies focus on alleviating suffering among the extremely poor via direct interventions at the “grassroots.” Many interventions therefore tend to be designed with a view of either constraining allegedly nefarious and/or clueless local elites via “institutions”; or completely circumventing them and going directly to the people. Needless to say, the attempts to go around local elites often result in failure.

The point here is not completely disparage pro-poor policies or governance reform programs. Rather, it is a reminder that chances of successful intervention go up when local elites are meaningfully involved. And by “involved” I mean when their interests and ideas are taken seriously. Elite capture is obviously a bad. But elite buy-in is almost always necessary for success. It is local elites that have the wherewithal to own job-generating cement plants. It is local elites who set tax rates. And it is local elites who build roads and power supply lines. Their ideas and interests therefore matter, and should be taken seriously (also just in case they do not necessarily want to, or cannot, transform their societies exactly into Denmark).

I say this because the assumption that local elites do not have much to offer except to steal state/aid resources for private benefit leads to research agendas (and interventions) that over-simplify their role in the whole process. Understanding local political dynamics, as suggested by Pepinsky, is therefore key for success. This means going beyond boilerplate “stylized facts” about ethnicity (or other sectoral interests) and patronage; and taking institutions (for example legislatures) and the coalitions of politicians who constitute them seriously. As students of the political economy of development, we ought to invest more in understanding local elite interests and ideas and how they influence state institutions and welfare outcomes at the grassroots.

Imagine for a second how different IMF or World Bank interventions would be if all their agreements with developing countries (say above a prescribed dollar amount) were subject to ratification by host-country legislatures. The process would be messy, yes (looking at you, Greece*). But I’d argue that finance ministers would get much better deals for their people — in no small part on account of greater levels of intra-elite accountability in the management of aid resources.

The irony of development research and practice is that we talk a lot about the importance of institutions, but then turn around and come up with ideas to circumvent them (and their elite membership) at every opportunity.

My friend Jack likes to tell his favorite story about a summer he spent volunteering in Colombia. He recounts that story anytime he’s handed the opportunity, at parties, lunch meetings and airports. He highlights varying facets of the story on different occasions — the snake he found in his tent, his camaraderie with the locals and his skills at haggling. The message to his audience is clear: I chose hardship and survived it.

If designer clothes and fancy cars signal material status, his story of a deliberate embrace of poverty and its discomforts signals superiority of character. As summer looms, many Americans — college students, retirees and others who stand at the cusp of life changes — will make similar choices in search of transformational experiences. An industry exists to make these easier to make: the voluntourism business.

As admirably altruistic as it sounds, the problem with voluntourism is its singular focus on the volunteer’s quest for experience, as opposed to the recipient community’s actual needs.

Zakaria rightly adds that:

Despite its flaws, the educational aspect of voluntourism’s cross-cultural exchange must be saved, made better instead of being rejected completely.

As a volunteer or an academic researcher this summer, here are a few things you can do out of respect for the people you work with (especially if you fit standard definitions of “expat”). These points might seem obvious, but even seasoned professionals need a reminder every now and then.

Be respectful: I am often shocked at how some otherwise reasonable academics and college students acquire an aura of arrogant omnipotence the second they land in a developing country. Being accorded high status on account of foreignness can do real damage, it turns out. Do not feed off of this. Maintain a level head, and respect those that you deal with. It is for your own good. You will never be able to completely transform the societies you work in, or study. Be humble. Think incremental change. Remember that your presence is temporary. Do not exploit the goodwill of your hosts.

Work with the grain: Do not seek to disrupt the way people do things. You can offer advice and introduce people in the villages you visit to new ideas. But do not imagine yourself to be the great change agent. Because you are not. Sustainable change must be anchored within local power dynamics. Do not create parallel systems. I reiterate, whatever change you introduce must be anchored in existing systems. That is the only way the change will be incentive-compatible with the interests of those who hold the power to completely sabotage everything you do. You will most certainly fail if you ignore this reality.

This is not cool

Keep a diary: You will be in a lot of situations in which you can’t say exactly what you think (and shouldn’t). So keep a diary, and have it be the place where you jot down your naive and disrespectful random thoughts (we all have these thoughts). Review these diary entries once in a while. See if your entries change as you get to know your hosts better. If they don’t, find out what’s missing.

Lastly, do not plaster your social media profile wall-to-wall with images of anonymous people in various states of desperation. Nothing says that you are a jerk like having images of anonymous kids with torn clothes milling around you on your Facebook page. Whatever images you post, the world will know whether these were your real friends or just props to advertise to the world that you went to Nicaragua or Namibia. Do not post pictures of people whose names you don’t know, or of children whose parents did not give you permission to do so. Please, do not be that person.

Also, do not forget to learn. Learn and learn some more. And share with your hosts as much as you can.

The international development bill passed its third reading in the House of Lords on Monday and will now receive royal assent. Britain met the 0.7% target for the first time last year when it spent £11.4bn – or 0.72% of its GNI – on overseas aid.

The 0.7% commitment was established by the UN in 1970. In 2013, only five other countries – Sweden, Norway, Luxembourg, Denmark and the United Arab Emirates – had met or exceeded the 0.7% aid spending target. The Netherlands had consistently met the target, but fell short in 2013.

All well and good.

The question, though, is what proportion of the 0.7% will finance various jobs programs for UK (and other Western) nationals working in the global development industrial complex (or in other sectors that benefit from tied aid) versus actually going to poverty alleviation in the developing world.

Source: Daily Nation

And speaking of the global development industry, here’s a nice quote from the Economist newspaper on SDGs:

Developing countries seem to think that the more goals there are, the more aid money they will receive. They are wrong. The SDGs are unfeasibly expensive. Meeting them would cost $2 trillion-3 trillion a year of public and private money over 15 years. That is roughly 15% of annual global savings, or 4% of world GDP. At the moment, Western governments promise to provide 0.7% of GDP in aid, and in fact stump up only about a third of that. Planning to spend many times the amount that countries fail to give today is pure fantasy.

The backers of the SDGs concede from the outset that not all countries will meet all the targets—an admission that robs the goals of the power to shame. The MDGs at least identified priorities and chivvied along countries that failed to live up to their promises; a set of 169 commandments means, in practice, no priorities at all.

A set of 169 commandments also means fundraising opportunities for everyones’ pet issue. But it also means extra meetings, workshop, and clueless tied aid expats consultants for developing country Civil Servants to deal with; and little time for the boring things that actually contribute to sustainable improvement of human welfare.

Wantchekon, Klasnja and Novta have a really cool paper (forthcoming in QJE) investigating the relationship between human capital and development:

Using a unique dataset on students from the first regional schools in colonial Benin, we investigate the effect of education on living standards, occupation and political participation. Since both school locations and student cohorts were selected with very little information, treatment and control groups are balanced on observables. We can therefore estimate the effect of education by comparing the treated to the untreated living in the same village, as well as those living in villages where no schools were set up. We find a significant positive treatment effect of education for the first generation of students, as well as their descendants: they have higher living standards, are less likely to be farmers, and are more likely to be politically active. We find large village-level externalities – descendants of the uneducated in villages with schools do better than those in control villages. We also find extended family externalities – nephews and nieces directly benefit from their uncle’s education – and we show that this represents a “family-tax,” as educated uncles transfer resources to the extended family.

The amazing finding is that having just one educated person in an extended family makes a significant difference, not only for the educated person’s offspring, but also for their nieces and nephews:

These descendants have better education at all levels than descendants (either children on nieces and nephews) in families where no progenitor was educated. These effects are statistically significant and substantial – such descendants are 20% more likely to have primary school education, 19% more likely to have secondary school education and 11% more likely to go to university..

The main takeaway of the paper is that investment in human capital has a positive effect on long-term development that is independent of (colonial) institutions.

Haushofer and Shapiro have a really cool paper evaluating the impact of unconditional direct cash transfers to households in rural southwestern Kenya (Rarieda in Siaya County). The paper contains several great insights relevant for policy-makers on the promise of direct cash transfers. Here are some highlights:

[i] …… we find increases in holdings of home durables (notably metal roofs, ownership of which increased by 23 percentage points over a control group mean of 16 percent), and productive assets such as livestock, whose value increases by USD 85 over a control group mean of USD 167. These investments translate into higher revenues from agriculture, animal husbandry, and non-agricultural enterprises; monthly revenue from these sources increases by USD 17 relative to a control group mean of USD 49. Note, however, that this revenue increase is partially offset by an increase in flow expenses for agriculture, animal husbandry, and business (USD 13 relative to a control group mean of USD 24).

[ii]We find that indeed monthly transfer recipients are significantly less likely to invest in durables such as metal roofs than lump-sum transfer recipients, suggesting that households may be both credit- and savings-constrained. The fact that program participation required signing up for mobile money accounts, which are a low-cost savings technology (people could have chosen to accumulate their transfer – and even add other money – on their M-Pesa account), suggests that the savings constraint at work is more social or behavioral than purely due to lack of access to a savings technology.

[iii]…. contrary to previous literature and our expectation, we find no significant differences between transfers to men and transfers to women in expenditure decisions or any other outcomes.

Oh, and there is more…

… we find significant reductions in cortisol levels in several treatment arms: specifically, large transfers, transfers to women, and lump-sum transfers lead to significantly lower cortisol levels than small transfers, transfers to men, and monthly transfers. Some of these effects occur in the absence of differences in traditional outcome variables. Together, these results support a causal effect of poverty (alleviation) on (reductions in) stress levels. More broadly, they suggest that psychological well-being and cortisol can complement traditional welfare measures, and in some cases may in fact respond to interventions with greater sensitivity than these traditional measures.

Amazing stuff.

So what are some of the policy implications?

Direct cash transfers are not the panacea to underdevelopment. But these findings and others out there (see summary here) are evidence that we should seriously consider Martin Ravallion’s idea of raising the consumption floor of the poorest of the poor in developing countries through direct policy intervention (e.g. through cash transfers).

Making direct cash transfers work for development will be predicated on taking the interventions out of the humanitarian/aid sphere, and integrating them into the national political economies of developing countries.

In my view, the need for a higher consumption floor will soon become politically salient due to rapid urbanization rates in many developing countries. Obviously, aid money alone will not be able to fully finance such a policy. More efficient public finance management in developing countries will be one way to fill the gap. Putting aside the overhyped storied budgetary leakages due to corruption, many developing countries still do not meet their annual budgeted expenditure goals due to lack of absorptive capacity, i.e. money simply never gets spent at the end of the fiscal year and is returned to the treasury.

Click on image to enlarge

For instance, according to an internal Ugandan government report, between 2004-2010 an average of 3.4% of budgetary allocations to central government ministries, departments, and agencies returned to the treasury (this was net of corruption and other leakages). Note that the figure is most likely higher if you factor in local government expenditures. And as Figure 2 above shows, late disbursement is the norm, which makes budgeting within government agencies a nightmare. In addition, over the same period (2004-10), the proportion of the budget that was simply not released (as opposed to released and not absorbed) was a staggering 9.92%!

This is money that can go directly to citizens’ pockets. And we have the technology, thanks to M-Pesa, to effect the policy. Governments shouldn’t be allowed to handle more money than they have capacity to spend. Plus making legislative appropriation conditional on agency capacity could be a way to incentivize capacity building more than a million workshops and study tours could ever do.

Lastly, the idea of a consumption floor for the urban poor might not appeal to some higher income tax payers. But smart politicians should be able to remind these voters that there is only so much physical security that one can get from high fences topped with electrified razor wire.

This afternoon I joined NYU’s William Easterly, Ingrid Kvangraven of the New School and Daniel Kaufmann of Revenue Watch to talk about Easterly’s new book, The Tyranny of Experts. You will notice that I am a huge fan of STATE CAPACITY.

(Apparently, graduate school prepares you not for TV appearances…)

Note: If you are in the US you have to VPN it since al jazeera doesn’t stream content in the US.

In preparation for the show I finally finished reading Easterly’s book. A review is coming soon (grad school permitting).

This is a guest post by friend of the blog Matthew Kustenbauder responding to a previous post.

On the question of human rights guiding America’s foreign policy in Africa, I agree with you; it shouldn’t be the first priority. The US needs a more pragmatic development diplomacy strategy, which would help African countries develop just as it would help American businesses thrive.

But I disagree with your characterization of Hillary’s position in this respect. Here’s Secretary Clinton’s own words:

“Last year I laid out America’s economic statecraft agenda in a series of speeches in Washington, Hong Kong, San Francisco, and New York. Since then, we’ve accelerated the process of updating our foreign policy priorities to take economics more into account. And that includes emphasizing the Asia Pacific region and elevating economics in relations with other regions, like in Latin America, for example, the destination for 40 percent of U.S. exports. We have ratified free trade agreements with Colombia and Panama. We are welcoming more of our neighbours, including Canada and Mexico, into the Trans-Pacific Partnership process. And we think it’s imperative that we continue to build an economic relationship that covers the entire hemisphere for the future.”

“Africa is home to seven of the world’s ten fastest-growing economies. People are often surprised when I say that, but it’s true. And we are approaching Africa as a continent of opportunity and a place for growth, not just a site of endless conflict and crisis. All over the world, we are turning to economic solutions for strategic challenges; for example, using new financial tools to squeeze Iran’s nuclear program. And we’re stepping up commercial diplomacy, what I like to call jobs diplomacy, to boost U.S. exports, open new markets, lower the playing field – level the playing field for our businesses. And we’re building the diplomatic capacity to execute this agenda so that our diplomats are out there every single day promoting our economic agenda.”

One of the problems, however, is that the pragmatic approach articulated by the Secretary doesn’t trickle down through the bureaucracy. This is especially true, ironically, of the State Department’s primary development diplomacy arm, USAID, which has a deeply entrenched culture of being anti-business. It’s a huge problem, and part of the reason why American foreign policy in Africa has been so slow to adjust to new economic realities.

Security drives US Africa Policy

Academics schooled in all the latest development orthodoxies but lacking the most basic understanding of economic or business history have flocked to USAID, so that the suggestion that American economic interests should guide development policy – making it a win-win for Africa and America – is anathema. It’s also why the Chinese are running all over the US in Africa.

As a prominent economic historian recently remarked in the Telegraph, “While we [Western governments] indulge our Victorian urge to give alms to the Africans, Beijing is pumping black gold.” And this is just it. As long as the US approaches Africa as a beggar needing to be saved and not as a business partner worthy of attention, both sides will continue to lose out.

In this respect, what Africa does not need is another “old Africa hand” steeped in conventional development ideas and old dogmas about what’s wrong with Africa and why the US must atone for the West’s sins. For this reason alone, John Kerry – not Susan Rice – probably stands a better chance, as the next Secretary of State, at putting American foreign policy toward Africa on a more solid footing.

– Matthew Kustenbauder is a PhD candidate in history at Harvard University.

I just read Chris Blattman’s response to the UK Prime Minister’s op-ed in the Journal. It reminded me of a lot of the things that I have been reading lately in preparation for my fieldwork (My dissertation will tackle the subject of legislative (under)development in Africa, with a focus on the Kenyan and Zambian legislatures).

Cameron’s sentiments in the op-ed are emblematic of the problems of development assistance. Like in all kinds of foreign intervention, developed states often try to externalize their institutions (and more generally, ways of doing things). These attempts often ignore the lived realities of the countries being assisted.

Forgetting the history of his own country (think autocratic monarchs, monopolies, limited suffrage), Cameron thinks that democracy, human rights and free markets (all great things) will magically create jobs in the developing states of the world. They don’t. In fact, they often lag the job creation process. For development assistance to be effective it must eschew these feel-good approaches to the problem of underdevelopment.

Blattman is spot on on a number of points:

Unchecked leaders are bad for economic development (this is why I am so much into PARLIAMENTS!!!): Also, democracy is NOT synonymous with limited government. Heads of state like Queen Victoria or Hu Jintao or Bismarck or even Seretse Khama were in no measure democrats. However, they reined under systems with strong (sometimes extra-constitutional) checks to their power. That made a difference.

Institutions rule, yes, but the right kinds of institutions:1688 moments do not drop out of the sky. They are often preceded by decades if not centuries of civil strife, economic change and plain old learning. Institutional development takes time. Plus each society requires its own unique and appropriate mix of institutional arrangements to meet unique economic and social needs. A procrustean approach to institutional development (embodied in global capacity building) will inevitably fail. Institutional development must never be allowed to be captured by those who think that we can transform Chad simply by having them adopt Swedish institutions.

Growth will require creation of jobs, i.e. industrial development: The poor countries of the world need real jobs for high school-leavers and other less educated people. The present focus on the “sexy” entrepreneural sectors – whether they are small businesses for the poor or tech hubs for the very highly educated – as the engines for growth in the developing world is misguided. I reiterate, starting a business is a very risky venture that should be left to the wealthy and the occasional dare devil. The poor in the global south need stable 9-5 jobs. Lots of them.

And lastly, where do strong institutions come from? There is no easy answer to this question. What we know is:

Democracy does not always create strong institutions: Since 1945 many have chosen to forget the fact that universal suffrage is a pretty recent phenomenon in the political history of the world. For the longest time world polities were ruled by power barons who held de facto power (as opposed to the procedural de jure power in democracies). When democracy came along after the Enlightenment the resulting structures of rule often reflected these de facto configurations of power. Over time institutions in these countries were cemented enough to allow for complete outsiders like say the current president of the United States to be elected without upsetting the balance of power (in another era he would have had to have mounted a coup). This is the challenge of the democratization in the new post-WWII states. How do you make democracy serve the interests of the people, rather that purely that of the elite? How do you use democracy to create strong institutions? Is this even possible? And if not, what other options do we have?

CAIRO (Reuters) - The United States and Egypt are returning to a "stronger base" in bilateral ties despite tensions and human rights concerns, U.S. Secretary of State John Kerry said on Sunday after talks with his Egyptian counterpart.

BERLIN (Reuters) - French finance minister Michel Sapin has criticized his German counterpart Wolfgang Schaeuble for suggesting that Greece could temporarily leave the euro zone, but said the Franco-German relationship is "not broken".

BERLIN (Reuters) - German Chancellor Angela Merkel faced pressure from conservative allies on Sunday to run for a fourth term in 2017 after an opinion poll showed they could win an absolute majority if an election were held next week.